It looks like that Compaq is really going to put salts in competitors' eyes. The new round of the price cutting war will hurt Apple badly.
Compaq cuts prices in new challenge to computer rivals (Monday July 22 1996) By Christopher Parkes in Los Angeles
Compaq, the world's leading personal computer maker, today presents a fresh challenge to its competitors with the world launch of a number of high-powered machines for business users at prices 10-15 per cent lower than its previous range. It will be the latest shot in a vicious computer price war which has undermined manufacturers profits' and knocked the US stock market. Compaq will today also start deliveries of the new range outside the US. Prices will depend on local market conditions but reductions are expected to be similar to those in North America. "We are anticipating a reaction from competitors," said Mr Lewis Schrock, Compaq's business product manager. "But the cost and price savings have been designed into these machines from the ground up. It will be harder for them to come back at us this time," he claimed. New manufacturing processes had helped cut production costs at Compaq's factories in Houston, Scotland and Singapore by 17 per cent. Retail prices for the most basic model, which includes a Pentium 100MHz microprocessor, start at $1,100 in the US. One leading US mail order supplier was last week still offering a 75MHz Compaq Deskpro business computer for $1,499. The top of the new range, equipped with Intel's Pentium Pro 200MHz chips, are expected to sell for $4,800. The introduction, just before the group is expected to release flat results for the three months to the end of June, completes a revamp of Compaq's marketing and model range. It comes a week after Dell, Compaq's closest competitor and the leading direct marketer of PCs in the US, reduced prices on its business computers for the third time this year. Although aggressive pricing has long been a characteristic of the PC market, the pace and range of cuts has been stepped up by manufacturers anxious to boost slowing sales to business customers. Compaq, which yesterday also announced reductions of up to 23 per cent on its existing business machines, rebooted its falling revenues in the quarter to the end of March by slashing 20 per cent off most prices, However, such tactics have hit margins and earnings across the industry, and a nervous Wall Street was rattled further when Hewlett-Packard recently reported slowing sales. In the past few weeks Compaq has introduced enhanced models for the consumer, laptop and network server markets which will be managed as distinct market segments. The new Deskpro range completes the process. |
